Minister Dlamini outlines progress in social grants

Friday, September 15, 2017

Social Development Minister Bathabile Dlamini says government is committed to ensuring the payment of social grants beyond March 2018 when the contract of the current payment service provider comes to an end.

“[The South African Social Security Agency] SASSA [is] collaborating with the South African Post Office (SAPO), with the view to work together to ensure payment of social grants beyond March 2018… Government, through the work of the IMC, remains committed to this collaboration,” said the Minister on Friday.

Minister Dlamini held a media briefing in Tshwane to give a progress report on the steps taken by the Department of Social Development and SASSA to meet the orders of the Constitutional Court -- made in March this year -- in the payment of social grants.

At the time, the Constitutional Court extended SASSA’s contract with Cash Paymaster Services (CPS) for a year in order to fulfil the constitutional obligation of paying social grants to beneficiaries.

CPS is responsible for the distribution of social grants to 17 million beneficiaries. Its contract, which was declared invalid by the Constitutional Court in 2014, would have come to an end on 31 March 2017. The court, however, suspended the invalidity so grants could continue to be paid while SASSA made another plan.

The court also suspended the declaration of the invalidation of the CPS contract for a period of 12 months from 1 April 2017. As per the Constitutional Court order, steps are now being taken by the department to ensure the appointment of a new payment service provider when the current 12-month contract with CPS lapses at the end of this financial year.

In its judgment, the Constitutional Court ordered the Minister of Social Development and SASSA to submit quarterly reports highlighting these steps.

 SAPO has raised its hand as being ready to use its entity, Postbank, to help SASSA take over the payment of social grants.

On Friday, Minister Dlamini said plans are underway to open SASSA’s corporate account with special beneficiary disbursement accounts through a sponsor bank. This account will be solely managed by SASSA. These two accounts will be opened with the same bank to reduce costs and improve the ability to transfer funds freely.

Under the current contract with CPS, the total amount for all social assistance transfers are deposited into a CPS bank account.

“This creates serious challenges as SASSA is unable to have direct oversight on this account. To address this, SASSA is in the process of reactivating its paymaster general account with the South African Reserve Bank. To this end, we are in consultation with the National Treasury,” said the Minister.

Both processes will be finalised by January 2018, the Minister said.

Five-year change programme

In June, SASSA outlined a five-year change programme to take over the function of paying social grants.

The Inter-Ministerial Committee (IMC) on Comprehensive Social Security, led by Minister Dlamini, says the proposed five-year takeover period is based on extensive research into various payment options and recommendations of the Ministerial Advisory Committee.

“The in-sourcing and integration of the grants administration and payment value chain is an enormous task that requires time, high level specialised skills and resources that are currently not readily available,” said Minister Dlamini.

As part of interim arrangements, SASSA began collaborating with SAPO with the view to work together to ensure payment of social grants beyond March 2018.

Minister Dlamini said in accordance with Instruction Note 3 of 2016/17, National Treasury granted SASSA a deviation from a competitive bidding process, subject to a number of conditions, including the submission of an amended procurement plan and consideration of the financial proposal from SAPO through Bid Committees.

“As per the recommendation of the IMC meeting held on 13 June 2017, SASSA issued a Request for Proposal to SAPO on 24 July. The IMC also recommended that comprehensive due diligence be undertaken on SAPO.

“… Due diligence is nothing new, but a common business prerequisite to inform decision making, particularly on an important matter such as the one we are discussing today. It looks at a number of issues, including risks and opportunities, financial implications, legal implications, regulatory impacts and wider implications, to name but a few.

“Due to the fact this is a highly technical and specialised field, SASSA issued a Request for Quotation (RFQ) to appoint a service provider for this purpose. This process did not yield the desired results. Using National Treasury’s central supplier database, SASSA then issued the RFQ to a group of service providers.

“All four service providers submitted their quotations late, resulting in further unavoidable delays in the finalisation of this process in terms of the procurement schedule. The process was rerun and the CSIR [Council for Scientific and Industrial Research] was subsequently appointed to conduct due diligence, which commenced on 31 August and was completed on Thursday, 14 September 2017,” Minister Dlamini explained.

The Bid Evaluation Committee will consider the report on 20 September 2017, with a decision expected before the end of next week, according to the Minister.

In-sourcing and direct payments

The Minister said they have learned many important lessons on out- and in-sourcing.

“…What we have learnt over the years is that we need to regain or improve SASSA’s control over critical functions and strategic processes.”

Regulation 21 of the Social Assistance Act makes provision for cash payment or direct transfer into the commercial bank accounts of beneficiaries.

By the end of this month, CPS will make available to SASSA, a full list of all beneficiaries whose grants are paid into their commercial bank accounts.

SASSA is currently in consultation with National Treasury to re-establish the link to Bankserv to enable these payments. Once finalised, over two million beneficiaries will be paid using this method. This will reduce the number of beneficiaries who depend on other payment channels. –

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